Reform in the Trenches

Philip Betbeze, for HealthLeaders Media , June 13, 2012
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Pros at the table
Greater Newport Physicians, an independent practice association in Orange County, Calif., boasts nearly 500 physicians and more than 100,000 patients. It sends most of its inpatients exclusively to Hoag Memorial Hospital Presbyterian, a two-hospital system with seven health centers. Greater Newport is part of Hoag's 1,200-strong network of physicians. Peculiar to California, with narrow exceptions, hospitals are prohibited from employing physicians, so the independent referral network is critical. Also, much of the commercial patient population for both Hoag and Greater Newport is capitated, which gives the hospitals a head start on collaboratively managing care and costs. But that still leaves a lot of work to be done under a three-year contract with Blue Shield of California to provide "accountable care" to 11,000 of its HMO members in Orange County.

"What's different for us is that we're not experimenting in managed care but rather a collaborative relationship between hospital, medical groups, and health plan," says Richard Afable, MD,  president and CEO of  Hoag.

The three-year contract begins July 1 in an effort improve healthcare quality and cut costs over time—sharing the savings among the three parties. The financial goal: zero premium increases for employers and patients over the term of the contract.

Alan Puzarne, chief operating officer for Greater Newport, has the experience needed to negotiate such complex contracts—he was a vice president with Blue Shield for many years.

"One area of responsibility happened to be contracting with providers and hospitals," he says.

That experience has been invaluable in negotiating this deal, he says, because what's been missing in negotiations of the past has been having all affected parties at the negotiating table—and, critically, equal access to information.

"This is a unique approach to contracting because it's three-way," says Puzarne. "One thing that's particularly valuable in that process is that all the data that we have was put into a template and we all could see everyone's cost.

 "If you're all transparent, you might get to a better outcome," he says cautiously. "We all knew the costs and drivers, which made for more thoughtful and less adversarial negotiations."


Afable, for his part, agrees that open sharing of cost data was a starting point, and nonnegotiable.

"The difficulty has always been the willingness of health plans to share data," he says. "We've always wanted to, but health plans generally have been unwilling for competitive and negotiation reasons."

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